April 15, 2011

Russian local grain markets in difficult situation

The current state of the Russian market grains remains difficult, with the grain export ban almost completely eliminating sales of grains from the southern areas of Russia, where agrarians have already begun the mass planting works of grains and leguminous plants.

The harvesting work of early grains will start in the nearest future.

The existing inclination for grain prices to fall will possibly carry on and result in major problems for grain producers, added the experts.

According to them, demand for grains from the southern areas is rather low to date, and without export trade in the closest months, the trend will continue. Restoration of grain exports, even in the limited form be it in export quotas or export duties, would become the possible solution from the situation.

According to Vladimir Petrichenko, General Director of ProZerno Ltd., if the acceptance on the extension of the grain export ban were to take place, the prices on the local market would drop by about RUB500-1000/tonne (US$18-35) as compared to the current level. However, if the export embargo is not extended, Russian grains will go back on the world market, and local prices will become comparable with the world ones.

On the other hand, the variation of continuation of the export ban is more likely for now because of the imprecision of the present year grain harvest volumes, he added. Simultaneously, with regards to increasing protesting moods of grain producers due to the drop in prices, the government can also terminate the grain export embargo after July 1.